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Decent Work Pilot Programme
Country Brief: Panama
I.
National Context
With per capita national income of nearly $4,450 in 2004, Panama is a middle-income
country of just over 3 million people. A member of the WTO, Panama has an open
economy and liberalized trade. As is the case for most countries in Latin American,
Panama has been deeply affected by global economic integration and structural
adjustment.
Global Economy
Globalization was a feature of Panama’s history long before the term became
common currency. The Panama Canal, opened in 1914, remains a lifeline of
international maritime transport. Its reversion to national control in 1999 has, if
anything, underscored its global character. Panama also lends its flag to a sizeable
merchant shipping fleet, most of which is owned and operated by non-residents. And
Panama has woven tight linkages with the international financial community through
its banking centre.
Panama adopted the U.S. dollar as its currency early in the 20th century. It has no
central bank and is not exposed to foreign exchange risk. As a result, its rate of
inflation is low by international and regional standards.
While these features distinguish Panama from other Central and Latin American
countries, there are also many similarities with the rest of the region. It had sluggish
economic growth during the 1980s, a decade that ended with a military invasion
deposing a military dictatorship, partly due to a mounting fiscal deficit and external
public debt. Panama also entered into a structural adjustment process with the
assistance of the IMF.
Following a deep recession in 1987-89, macroeconomic stability returned in the 1990s
along with positive rates of economic growth. GDP growth was on average higher in
the 1990s than the previous decade. Nonetheless, growth has been well below rates
needed for employment generation to keep up with growth in the labour force. In
addition, governments have tended to view employment as a residual of economic
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